Rob Ford's Toronto

[Armbruster]

I'm not sure I have an issue with selling Toronto Hydro. I have a hard time figuring out why that utility needs to be owned by the city, and the city might be able to make some money and/or bring a dose of competition into electricity that might help lower costs and/or help service. But, and it's a huge but, utilities are a really, really difficult thing to privatize withour adverse negative effects. I'm conflicted on that one.

You don't have to get too conflicted. Before you dive into a complicated analysis of public vs. private or whether the City "needs to be in this business," just compare what Toronto Hydro earns for the City with the interest charges on debt that could be paid off by selling TH.

For example, the Toronto Parking Authority is estimated to be worth about $1 billion, and earns about $100 million annually for the City (which would be more if the City charged market parking fees). That's a return-on-investment of 10%. Meanwhile, interest rates are extremely low, about 2-3% on a medium-term municipal bond. Ten is higher than 2 (even before considering inflation), therefore the City must not sell.

When interest rates are so low, it makes no sense to pay off debt by selling revenue-generating assets that earn a much higher return-on-investment. And it is 100% batshit insane to sell off these assets just to plug a one-time hole in the operational budget, as self-presumed "fiscally-responsible" types at City Hall keep threatening to do.

It should scare everyone that budget chief Mike Del Grande, who repeatedly boasts about being a chartered accountant, seems to know nothing about opportunity costs, and shares the medieval belief that debt is an inherent evil that must be eliminated at all costs, even if it means selling valuable money-earning public assets at fire sale prices. Someone should ask the CICA how they can certify someone who offers such crappy financial advice.

 

[Eug]

I haven't heard anyone seriously talk about selling the Toronto Parking Authority in recent times. Is there such talk?

As for Toronto Hydro, the issue in the past has been that outside companies have been unwilling to pay the kind of money that the pro-privatization types would want for it. Ie. They don't necessarily want to sell it at firesale prices. They want to sell it at a decent price, which makes it quite hard to sell esp. if it is associated with extremely heavy regulation and high unionized labour costs.

 

[Armbruster]

I haven't heard anyone seriously talk about selling the Toronto Parking Authority in recent times. Is there such talk?

By "serious," do you mean that influential people have proposed it, or that they are studying the issue in a thoughtful way? Selling TPA parking lots and garages were proposed in the KPMG report. More details here.

 

[Eug]

By "serious," do you mean that influential people have proposed it, or that they are studying the issue in a thoughtful way? Selling TPA parking lots and garages were proposed in the KPMG report. More details here.

Interesting. I didn't know that. I guess it would have to depend on how much they could get for it. That article seems to suggest Chicago did pretty well by leasing it.

However, like that councillor suggests, I think they should just raise rates. Downtown and many other areas could easily tolerate moderate rate increases.

 

[W. K. Lis]

Interesting. I didn't know that. I guess it would have to depend on how much they could get for it. That article seems to suggest Chicago did pretty well by leasing it.

However, like that councillor suggests, I think they should just raise rates. Downtown and many other areas could easily tolerate moderate rate increases.

Raising the parking rates would bring back one front on the War On The Car (as Rob Ford says), and Rob can't have that. If the Parking Authority was sold into private hands, they would raise parking rates as well, again something that automobile-addicted Rob would not take kindly to.

 

[Armbruster]

Interesting. I didn't know that. I guess it would have to depend on how much they could get for it. That article seems to suggest Chicago did pretty well by leasing it.

Many would argue otherwise. Investigative journalist Matt Taibbi says Chicago actually could have gotten nearly four times as much in the sale. Morgan Stanley, on the other hand, did indeed do pretty well. The bank represented the original American buyers, who then flipped their shares to an Abu Dhabi consortium at a tidy profit.

Read more (from the Atlantic): Why Does Abu Dhabi Own All of Chicago's Parking Meters?

Taibbi calls this a "bait and switch" pulled by Morgan Stanley on Chicago. He explains why this is about more than just parking meters. Now if city officials want to do anything that might disrupt parking meter revenue -- let's say close down parking for a street festival or parade -- they need to get the approval of those meters' shadowy, foreign owners. They also need approval to change parking hours or fees. The new ownership has already made unwelcome changes, ending the previous policy of allowing free parking on holidays. But not only did Chicago cede the operation of an entire segment of the city to mysterious private investors -- Taibbi says they could have gotten four times as much money for it, up to $5 billion.​

The whole episode is detailed in Taibbi's recent book, Griftopia. You can read an excerpt here.

But why turn to Chicago, when we already have our own example? The 407 toll highway was paid for by us, then sold at fire sale prices (in order to balance the budget, natch) to a foreign company, which promptly raised tolls. The province naively thought the company needed to seek permission for such increases, but courts have said they don't. To add insult to injury, the company has the power to deny license plate renewals for failure to pay, even though its billing system is notoriously faulty. To give you a taste of how badly Ontarians were ripped off, the highway was sold in 1999 for $3.1 billion. Last year, the CPP agreed to buy a 10% stake for $894 million, implying a total value of about $9 billion for the highway, or three times the original sale value (despite a recession and two stock market crashes - I defy anyone to find another security that tripled in value from pre-crash 1999 to post-crash 2010 [okay, Apple Inc., but you know what I mean]).

All this is why everyone needs to worry when the mayor says unnamed "people are knocking on my door" to buy city assets, or the mayor's brother is secretly meeting behind closed doors to discuss waterfront land sales and "backroom visions." The City has a lobbyist registry and integrity commissioner to ensure such meetings take place in the open, but this system has broken down. The mayor has set a banquet table for grifters to rip us off in the name of fiscal responsibility.

Councillor Rob Ford would never have stood for it.

 

[bobbob911]

Is anyone else following the debate today? I'm watching the torstar twitter feed and it could be journalistic spin but it really sounds to me like Rob Ford is absolutely melting down this morning.....

 

[BobBob]

Live video here: http://www.rogerstv.com/page.aspx?sid=1030&rid=16&lid=237&lve=22613

 

[Marcanadian]

Councillor Fletcher asked Ford to lobby the Premier on October 7th to de-amalgamate Toronto. Ford said he wasn't opposed to the idea, but needs numbers first.

I believe that's the first time de-amalgamation has been mentioned in City Council since Ford got elected.

 

[jje1000]

Livetweets for those who can't be bothered to hear all that screaming and ranting:

http://livenews.thestar.com/Event/Special_city_council_meeting
http://live.theglobeandmail.com/Eve...uncils_debate_on_Rob_Fords_epic_core_services
http://news.nationalpost.com/2011/0...eeting/?utm_source=dlvr.it&utm_medium=twitter

Here's a thinker - Ford says a lot of people in Etobicoke wished we could de-amalgamate. Mayor of Toronto says if there wasn't a huge financial issue, he would "love" to go back to the way it was... Huh.

 

[allabootmatt]

Anyone catch what he actually said re: streeetcar contract (may favorite subject)? This was the tweet from @reporterdonpeat:


@reporterdonpeat
Mayor Rob Ford adds he disagrees with the #TOCouncil decision to buy streetcars but city stuck paying for that

 

[W. K. Lis]

Is anyone else following the debate today? I'm watching the torstar twitter feed and it could be journalistic spin but it really sounds to me like Rob Ford is absolutely melting down this morning.....

Rob Ford, during the city budget debate, keeps saying the same sound bit over and over: "I listen to taxpayers". Liar

He seems only listen to those people who agree with him. I have sent him e-mails to the contrary. Sometimes I get the auto-reply, usually there is no reply. Maybe they get filtered out by his staff or e-mail filters, but it seems to be ignored. He does not listen to taxpayers, only to his yes-men and yes-women. If you disagree with him, you are zoned out. I will continue to e-mail my views to the mayor and my councillor.

If the city is such financial problems, why didn't the city increase the 2011 property tax at the inflation rate, but set at zero increase instead?

 

[JoeParez]

Anyone catch what he actually said re: streeetcar contract (may favorite subject)? This was the tweet from @reporterdonpeat:


@reporterdonpeat
Mayor Rob Ford adds he disagrees with the #TOCouncil decision to buy streetcars but city stuck paying for that

I'm not sure what to make of this. We've heard that the new streetcars were "next on the agenda" to be "cut". We also know of Rob Ford's dislike of the streetcars.
Is Rob Ford quietly saying "Yes, there will be new streetcars; I can't get rid of them like I thought?"

 

[AlvinofDiaspar]

I am sure there are juicy penalties attached to the contract - no politician would savour the prospect of having to pay multimillion dollars worth of penalities, getting grilled by the media and has nothing to show for it. Then again, it's Ford, so who knows - rationality isn't his strong suit.

AoD

 

[Fish&Chips]

I am sure there are juicy penalties attached to the contract - no politician would savour the prospect of having to pay multimillion dollars worth of penalities, getting grilled by the media and has nothing to show for it. Then again, it's Ford, so who knows - rationality isn't his strong suit.

AoD

How about the $47 million squandered when they cancelled Transit City. Hardly a peep from the media.